RE: CVRs listing on ASX

[2126]

In reviewing some of the documents that IOC has posted on Sedar website, in the FORM 51-102F3: MATERIAL CHANGE REPORT which was filed on May 20, 2016, I note that in the list of conditions precedent to the implementation of the OSH/IOC deal agreement [translation from legalese: things that OSH must do before deal closes], I find the following:

"Conditions Precedent to the Obligations of InterOil:

The obligation of InterOil to complete the Arrangement is subject to the fulfillment of each of the following conditions, which conditions are for the exclusive benefit of InterOil and may be waived by InterOil:

5. Oil Search shall have delivered evidence to InterOil that the CVRs shall at the Effective Time be approved for listing on a Qualified Exchange or shall have complied with its obligations under Section 2.15 [ASX Listing and Potential Amendments], including using its commercially reasonable efforts to ensure that the CVRs are listed on a Qualified Exchange, or if the CVRs cannot be listed, to ensure the availability of appropriate exemptions from the U.S. Securities Act and the U.S. Exchange Act with respect to the CVRs."

This translates that IOC has required that OSH uses its 'commercially reasonable efforts' to ensure that the CVRs are listed on the ASX or other exchange, or obtain exemtions under US SEC regulations

[Note 1: Such SEC exemption would NOT necessarily impact how the CVRs are treated by the IRS, with respect to capital gain/loss treatment. If the CVRs are not listed and are, thus, not publicly tradable, they may be considered 'contract rights' by the IRS, and be subject to ordinary income treatment].

[Note 2: IOC can waive this requirement of OSH.]

To my knowledge, still no word from OSH regarding efforts to list the CVRs on the ASX.

[Stavros]

To my knowledge, still no word from OSH regarding efforts to list the CVRs on the ASX.

Thanks "2126"

My views are:

1. OSH will say they expended "commercially reasonable efforts" but failed. NOTICE that they did not use the term "Best Efforts" which would require leaving "no stone unturned."

They made no efforts, "2126" and they will not make any!

Here is a very good explanation on what this means in Canadian Contract Law:

http://www.lexology.com/library/detail.a...2dc213e8c0

Summary

Performing an obligation with one’s "best efforts" is likely the most onerous standard of the three discussed in this article. If a party promises “best efforts”, everything that can be done should be done, but not to the point of that party bankrupting itself. Although the “best efforts” qualifier must be set against the context and purpose of the contract in which it is found, the phrase "no stone unturned" exemplifies the "best efforts" standard.

By contrast, "reasonable efforts" implies that what can be done should be done, in the context and purpose of the contract, but without requiring a party to leave "no stone unturned". "Reasonable efforts" is a less onerous standard than "best efforts".

Another variation is the "reasonable best efforts" phrase. This has not been explicitly considered in Canadian jurisprudence, though one American author opines that "best efforts" and "reasonable best efforts" are likely similar in that 'reasonable' in the latter phrase is largely irrelevant.2 This is significant in Canada (as in the United States) in that drafting with the phrase "reasonable best efforts" might get you in trouble if you think it means something less than "best efforts", because it may not. The better practice is to use "best efforts" ( to mean "no stones left unturned" ) and "reasonable efforts" ( to mean "some stones reasonably left unturned" ).

Finally, "commercially reasonable efforts" is a standard that has received little judicial consideration and ought to be treated with caution. One possible interpretation is that the market dictates the objective measure of value so as to determine how far the obligation must be taken. However, "commercially reasonable efforts" is ambiguous and ought to be expressly defined if used in contracts.

2. If the CVRs have any value at the end of their life, the entire value will be subject to Ordinary Income Tax

3. Antelope-7 will not be drilled and Certification/CVR Payment will be in 2016